Which of the following would result if the price level were below the equilibrium level?
A)Aggregate demand would increase.
B)Aggregate supply would decrease.
C)Consumers would bid prices up by competing for goods currently in shortage.
D)Shortages would force sellers to lower prices in order to increase aggregate quantity demanded.

Question

Quizplus · Accepted Answer

If the price level is below the equilibrium level, it means that there is a shortage of goods and services in the economy. This creates competition among consumers to purchase the limited quantity of goods available, driving up prices through bidding. This is why consumers would bid prices up by competing for goods currently in shortage. This would eventually lead to an increase in the aggregate price level as sellers will be incentivized to increase their prices to take advantage of the surge in demand. Hence, option C is the correct answer.

Which of the Following Would Result If the Price Level